Mooncake Company Uses the Perpetual Inventory Method

question 76

Multiple Choice

Mooncake Company uses the perpetual inventory method.The unadjusted balance in the company's Merchandise Inventory account is $120,000 at December 31,2014.A physical count of its inventory on that date discloses that the cost of the merchandise inventory available is $119,000.How would the company record the adjusting entry relating to the inventory shrinkage at December 31,2104?

• A)Debit Merchandise Inventory for $1,000 and credit Cost of Goods Sold for $1,000.
• B)Debit Cost of Goods Sold for $1,000 and credit Merchandise Inventory for $1,000.
• C)Debit Merchandise Inventory for $1,000 and credit Purchases for $1,000.
• D)Debit Purchases Expense for $1,000 and credit Merchandise Inventory for $1,000.
• E)Debit for Merchandise Inventory for $1,000 and credit Inventory Shrinkage Expense for $1,000.

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Definitions:

Revocability

The capability or the right to withdraw or cancel something, such as privileges, decisions, or policies, often within a legal or contractual context.

Organizational Effectiveness

Refers to how efficiently and effectively an organization achieves its goals and meets its stakeholders' needs.

Downsizing

The process of reducing the number of employees within a company, often to cut costs or improve efficiency.

Downsizing

The reduction of an organization's workforce to improve its efficiency or to cut costs, often involving layoffs.